Hello and welcome to The Ether. Today is Thursday, February 24th 2022. This episode of The Ether is brought to you by WeFund. WeFund is a community crowdfunding cross-chain incubator on Terra and it’s the first launchpad that implements a milestone funding release system to protect investors. All money raised for projects is deposited in Anchor Protocol and it’s refundable, and all decisions are based on community voting power. WeFund is community focused and designed to be a user friendly experience for both project creators and investors. Be sure to follow them on Twitter and join the Telegram for more information. Links are in the show notes and check them out online at wefund.app. This episode of The Ether is also brought to you by Talis. Talis Protocol is the NFT platform for independent artists on Terra. Talis helps to provide artists with the tools and resources needed to transition from traditional arts into the NFT world. With their V1 launch coming soon, Talis will be the place to see real world art reflected on Terra. Be sure to join their Telegram and follow Talis on Twitter for updates on their roadmap, validator, and other Talis news. Find your next favorite artists on talis.art. TerraSpaces appreciates the support from all our sponsors. Today on The Ether a Tokenomics discussion with Delphi Digital and Retrograde Money. Let’s take a listen.
Cool. So more and more people are joining. As I said, we’re just waiting for all the speakers because today is a big an amazing round of great people from the whole ecosystem that will be here. We have for the first time the Retrograde team here. I don’t know if I’ve said it correctly, if I bunch the name then sorry for that upfront, but hopefully I will learn today how to pronounce it correctly. Of course the whole Anchor team is here. We have already Nate with us and then Jose from Delphi as a contributor also to Astroport and Mars will join here in a minute and then hopefully we kick it off in latest two minutes. So I see here Mr. Pong is also requesting to speak. Let me bring him up. Very good. May we do a quick mic check already Pong, Atari, is it working for you guys?
Hey, I think it’s working here.
Check, check. We’re all in soon here.
Yep. Good on our end. And danku you got the pronunciation right.
Oh, thank you at least something. Did I get some points, right, because I mean all your names are basically about gaming, which I appreciate a lot so you have a lot of points with me already. [chuckle] So I don’t know.
Let’s give danku some gaming points, he deserves more than we give him so anything we can give him. [chuckle]
You know, you deserve a better mobile iPhone, Nate. So let’s see how long you survive in here. [chuckle]
I’m not gonna jinx it but I think Twitter finally fixed it for the Android tech guys like me. [chuckle]
That’s amazing. So upfront for everybody, if we run into issues, it’s Nate’s fault, right, we know this already now. [chuckle]
Blame the tech guy. [chuckle]
There we go, very good. So we are approaching… For me it is six o’clock in the afternoon, 5pm UTC. So that’s the time to start. We’re adding more and more people here. So let me quickly cross check also in the amazing file that you sent me, Nate, if everybody is here or if we still have some people. So from Anchor, Nate, let me know are we missing somebody? Did we already lose Nate? That would be just hilarious.
No. I’m here. [chuckle] Yeah, we have everybody on the Anchor side. We’ve got Sam, we’ve got Zion, myself. So we’re just waiting for Jose from Delphi.
And from the Retrograde team, we have Atari, we have Pong, but we also have Tetris in here.
Yep, yep, will be joining real soon.
Okay, amazing. Then we have all the big games together here and we’re just waiting a bit for Jose but the whole Spaces right now it’s filling up. So thank you everybody for being here with us. I’m seeing already the first request for questions. So just letting you know how the setup is usually of this AMAs, we have the guests in here, we have, of course, the Anchor team was facilitating all of this. We will discuss a very interesting topic, I think, tokenomics. I think everybody in the community knows that this is a hot topic, also for the Anchor token, and I myself am looking forward to discuss this topic and hopefully facilitate a great discussion. And then after, let’s say, more or less half an hour, 40 minutes, also depends on how many topics are discussed here, then we truly open up the Space for the AMA session itself. So then you can request it here. So sorry, if you’re right now requesting you’re not getting up here. We’re just waiting that everybody is first of all discussing from the different guests we have, and then later on, we have the AMA. And I see here also the Retrograde account is requesting, let me add him as a speaker as well. And then we’re just waiting for Jose. Let me ping him in Telegram.
But because we have so many people already here. Let’s be honest, let’s tackle the elephant in the room. I think everybody knows that it’s difficult time, right. I think we should talk about this just quickly in the beginning here. So if you have, I don’t know, friends, relatives, or if you are yourself in the Ukraine, I hope that you’re safe. I myself have friends in the Ukraine, I have friends in Germany that have family in the Ukraine, the situation is completely crazy and wild. We discussed before we started this AMA how to approach this, we said that we of course, want to send our prayers, all our support. This community is extremely strong, I know that people are already trying to think of how we could support it, how we can send stuff over there. So thank you very much for everybody. Feel free to always also approach me. You can find me on Telegram if you have ideas how we can support people in the Ukraine, be it friends or family, or whoever. So please let me know. And at the same time, we decided to keep on with the AMA here and focus on tokenomics for now. So I hope that this also gives you a little bit of time to not think all the time about this crazy and wild stuff. And we have here some exciting topics, which probably sounds weird that we won’t like to talk about tokenomics of Anchor Protocol. Very good.
So let’s try to add here the last pieces. And while we’re waiting for Jose, I don’t know, Nate, if you would like to give a little bit of a background of all those topics, which also Jose knows, right, what is happening right now with Anchor in general. Maybe also because there was the refill of the reserve. We haven’t talked about this. Maybe this is a good starting point here to then introduce the topic of tokenomics. And then we talk also about who Retrograde is, which I have a lot of interest in and proposed also this adjustment.
Yeah, I think there’ll probably be some alpha no doubt. Yeah, let’s touch base on the elephant in the room, which is the yield reserve, right? The way I see this, and again, personal opinion here is, look at where Anchor has come from to rivaling Aave, with nearly $1.12 billion under management there, right, under TLV. And so that kind of growth is just astounding, that kind of growth, if you look at it from a business perspective costs money, right. It’s not necessarily what we would call a sustainable trajectory, it’s just nearly impossible to keep up with that kind of growth, right. And that’s where we saw that misalignment with deposits from collateral, and so that yield injection is a way to allow Anchor to scale with sustainability, to focus on the new models that we had already been putting in place, putting into action, which is the new V2 borrow model, right, getting as many collateral types on as quick as possible. We only have two collateral types right now. And we have 20% paid on the Earn side, we can’t just have two collateral types to support that, right, we need to span the whole entire ecosystem if we’re going to support this kind of APY on the Earn side. So we need time to build that, we need time to catch up to that growth that we’ve had, we need ways to figure out how to monetize that, and that’s exactly what we’re doing with the community, and these ideas, to get this going. So this buys us time to do that and will get us there, right. It’s a moat if you think about it, right. What other protocol can bootstrap that kind of capital to support this kind of competitive advantage? I think that’s something to think about, right. And it just puts us in line to move towards sustainability is how I see that.
And that kind of fits in hand in hand in tandem with looking at Anchor tokenomics. As we know, this isn’t just specific to Anchor, right. This is specific to a lot of savings and lendings protocols, a lot of liquidity protocols, decentralized exchanges, were plagued with horrible tokenomics, right. I kind of laugh, I said tokenomics has become like throwing spaghetti at the wall. We need to look more at token engineering and what we can do to actually create utility. And so this is really what we’re going to focus today on.
Good point, just before we move on, give the last alpha, when do we see Anchor Protocol on Avalanche? You had this kind of AMA, right, you left me there without a date.
So we’re moving really, really quick. So cross-chain contracts are nearly finishing audit and so I can’t give an exact date but we’re moving as quick as possible. We want to see this out in the open sometime in March. Don’t hold us to that, audits are hard. So it’s gonna be here soon, though, right. Before you know it, we’re gonna have that on there. And lots of collateral coming in. If you look at what Benqi’s done with sAVAX, it’s amazing. I didn’t actually look in the last couple of days, but they nearly amassed over $2 billion of sAVAX at a period of weeks. So, mazing, amazing. And we’re looking forward to partnerships with them. We’re talking about ways where we can hopefully incentivize this further. So it’ll be exciting in the next couple of weeks.
Amazing. Can’t wait for that. And I already created my sAVAX and minted. I’m waiting to make that happen. And thank you for sharing there. I tried my best with the date for everybody, right. We are close to get a date from Nate now.
We’re getting close. We’re getting close. That’s good for crypto, right. [chuckle]
That’s very good. And now we have also Jose in here. Let’s quickly make a check. Jose, can you hear us?
José Maria Macedo 11:43
Yep, I can hear you. Sorry about that.
Thank you. Oh, no worries, ser. I guess it’s a good segue also to now talk about Jose and Retrograde, right, as the two additional guests in this amazing round talking about tokenomics. If it’s okay, Jose, for you, I would like to quickly focus on Retrograde. I think we had now here’s some issues, they just jumped out quickly. But we have Pong, Atari and the account itself, which I think is Tetris. So I don’t know you guys quickly would like to introduce yourself because I think everybody is waiting to learn more about you as a project, you guys, where you’re coming from. And then also later on we focus of course on the Anchor tokenomics proposal that you did.
Yeah, absolutely. Thank you for having us on. I mean, our team’s just been longtime admirers of Anchor and the foundational role it plays in Terra. So it’s been amazing to see the community rally after we pushed our proposal. And it’s an honor to be here. Context wise for Retrograde, Retrograde was really inspired by what Convex and REDACTED brought to the Curve ecosystem. In fact, we think that there’s an even greater need in Terra, given the state of governance today. Our team sees retrograde serving the Terra ecosystem in a couple of different ways. The first is ushering in a governance 2.0. Think of it as an era of promoting participation, good actors, and cohesion across key protocols. Second, is being a partner to both Anchor and Astroport, supercharging governance utility and value accrual for both. And kind of what better way to start off with than the foundational money market for DeFi and the core liquidity layer for Terra. And then I’d say lastly, really just helping jumpstart the narrative. So making it easy for protocols to accumulate ANC and ASTRO tokens ahead of potential new tokenomics models.
Nice one. So I don’t know if you quickly to also add there, give some background on your team. And then also when you probably, I don’t know, will truly go live as a protocol, which I understand you will become, right, and because that’s the question that we always ask, right, the wen. Because you started now, I guess, in a way that people probably don’t see also new protocols arrive, in terms of a proposal for another protocol. But of course this is inherent for yourself because it talks about governance.
Yeah, yeah, we’ve been monitoring the forum’s very closely since we pushed the initial veANC proposal and a lot of people have been asking who’s the team behind Retrograde. I’ll give a bit of background and then I think Tetris on our team is having a bit of trouble joining so he can sort of circle back later. I have a TradFi background, studied Curve and REDACTED a lot and feel that there are a lot of benefits we can overlay onto Terra. Other folks on our team, pretty much engineers from big tech, had a ton of free time, similar to kind of how Do sort of experienced things at Microsoft, and have been tinkering around on a lot of things in Terra. And we felt that we got really passionate about just addressing governance on Terra.
Got it. Good stuff. And of course, the big question is now, how you would like to improve this, and how can, in the long term also Retrograde help this. And Jose, I think this is a good segue also to introduce you, because I think you are one of the biggest experts also in terms of tokenomics. You have already proven several times with different protocols how to approach this. You’re usually thinking deeply about this. So maybe you can quickly introduce yourself to everybody, right, to what you have contributed, and then give also a quick intro in the topic of ve tokenomics, right. We have heard now several times the topic of REDACTED right, the REDACTED cartel, we have heard of Curve already, Astroport has similar tokenomics, so maybe you can take this away they’re, talk about yourself and then also ve tokenomics.
José Maria Macedo 15:53
Yeah, for sure. So I’m Jose. I’m the head of Delphi Labs and one of the founding partners of Delphi Ventures. So Delphi has sort of three main parts to it. There’s a research company, which is kind of how we built our name, and then a venture fund where we manage our own money and have made over 100 investments, including obviously Terra, and then Labs, which is where we incubate and build projects from the ground up, the first two are sort of Astroport and Mars, but we’re also working with teams like Suberra, and then Levana, and a few others across the ecosystem like Kinetic and stuff. Labs started off, before we were building, as basically doing token economics and mechanism design for a living. So we designed the AXS Axie Infinity token and worked with Synthetix, Compound, THORChain, and a bunch of others. So I’ve spent a while thinking about these things.
José Maria Macedo 16:48
We really like the ve token model. And I think the main reason for that is that first of all, it does a really good job aligning incentives between the users of the protocol, in general the supply side, so the liquidity providers, or in the case of Anchor the borrowers, or depending how this is structured… Obviously, I know some people have ideas around doing the Earn portion, but generally the users of the protocol and token holders, because it makes it so that the only way to maximize your benefit as a user and get the maximum yield is to be a token holder. And at the same time, the only way to maximize the utility of your tokens is to also be a user, so you can take advantage of that part of things. And I think that it also does a really good job kind of distributing governance to the most long term oriented participants, because the lock… When you lock your tokens for ve tokens, the longer you lock for the more ve tokens you get. And this does a really good job making it… And it doesn’t really benefit whales, it just kind of means that those who are willing to take the most long term view on things will have the most influence and also the highest reward, which I think makes a lot of sense. And then what we’ve seen with Curve, and we spent a lot of time studying the Curve ecosystem when we were thinking about Astroport, is that it also incentivizes DAOs to take kind of big positions in your token and to build services around your project, which I think is also a very positive thing.
José Maria Macedo 18:22
And it has been positive for Curve but I think there’s some downsides, like with how big Convex is on Curve. I don’t think that’s necessarily the best way for things to end up, having one sort of Convex that owns over 50% of the governance power. But I think that happened for idiosyncratic reasons where there was the whitelist on Ethereum. And so I don’t think that needs to happen on Terra. And I think Retrograde’s kind of taking the right approach here. And there are a few other teams that are thinking about this too. Yeah, happy to talk more about Anchor or whatever you prefer there.
Yeah, got it. No, thank you for the introduction. Just maybe quickly, because I think we haven’t mentioned yet. So the ve token, right, so vote escrowed token, so basically, an enhanced version of a token, just for everybody. I think we have so many people here to give also some additional background. You mentioned it Jose, right, there is right now a lot of protocols out there that have already introduced this. There are a lot of upsides. There are some downsides. Yes, we have the Convex topic and the Curve Wars in general on ETH. It’s interesting to see where Astroport is taking this now. And Nate, I would be just interested because we both, right, both of us we have talked a lot in the last week, we have talked about the Anchor tokenomics. So my big question is now did you kind of thought about this and then Retrograde was coming around the corner? Or how does this now all get started, right. Because I would be surprised if you have not been involved in any kind of way as a team also into this proposal or can you share something about this and touch upon also the proposal?
Yeah, I mean, I think no one’s gonna believe me, but this all happened serendipitously, right. There was just amazing synchrony. We actually… And we weren’t even talking to Jose either. All three teams had already been talking about what ve tokenomics would look like, would the community be behind it, right. We wanted to get some ideas out there, some feelers out there to see if the community would support it. Jose reached out to us, we’re like, “Yeah, we’re looking at that, too. Let’s kind of try to set a standard for the Terra ecosystem through getting community ideas about this.” And then he told us about Retrograde and Retrograde’s already working in progress, as well. So this all just happened really, in the last, what, two weeks, I think, two or three weeks. We’ve just been moving really fast. And what’s interesting is, like you said danku, we’ve talked a lot about tokenomics in the past. And we just… As a community we were never able to really come to some unified idea. A lot of it relied on using the Earn side to try to increase utility, it just makes a sloppy Earn side experience to do that, it makes it hard for third party integration. So there’s that push and pull there.
But if we look at it from an Anchor side, from the V2 model, this starts to make a lot of sense, because if you start onboarding a lot more collateral types, and then we can take that another level. And we can think about… The unfortunate side effect of liquid staking derivatives is there’s not a unified standard, right. If we look over on Solana, there’s already four different liquid staking derivatives. And so what’s naturally going to happen is they’re going to compete to meet key performance indicators, right. And those key performance indicators are really pretty simple. It’s like how much of the native token are you locking up into this liquid staking derivative. And if you look over to Polygon, there’s even revenue sharing agreements between Lido and Shard Labs about how much you can lock up with the underlying token, which then unlocks tokens. So there’s going to be a lot of demand to create utility behind these liquid staking derivatives as a way to create more adoption of them. Anchor is in a really key position to offer additional staking utility, right, if you can now take that liquid staking derivative, borrow against it for a near zero, or sometimes negative, interest rate to actually pay you to borrow against that, you can now deploy that into yield bearing strategies on top of that, so it’s super collateral efficient. So you’re gonna have a lot of liquid staking derivatives wanting to bid for maximum Anchor emissions to give the best utility to their liquid staking derivative to meet their goals of locking up underlying tokens. And so this is where I see it fitting in really well to the new ve model. And I know Retrograde, they’ve got a lot of thoughts. They’ve done a lot of deeper research than I’ve even done so I’ll kind of send that over to them and see what they might want to add.
Yeah, that would have been my question in terms of, maybe somebody of the team of Retrograde can give a little bit of a background of what are now the key points of this proposal, right, to maybe guide us through high level, so that everybody understands what this is. Of course, if somebody is in parallel, I don’t know, probably everybody’s on his phone, right, but in front of a laptop or so forth, you could also go into the Anchor Protocol forum, and pick it up there. And maybe you can read quickly through with us. Maybe somebody off the team could guide us high level through the main point so that everybody’s on the same level.
Yeah, yeah, absolutely. And we echo everything that Nate just mentioned, the ve token model isn’t perfect, but it’s one of the few battle-tested token models in DeFi. And the best part about the ve model, and what went into a big part of why we crafted it in that way is that it isn’t very intrusive to the existing Anchor tokenomics. You can almost view it more as icing on the cake. The only additional optionality now that the ANC token holder has beyond what they currently have today, is that you can lock it for a longer period of time and greater align yourself with the protocol. Maybe as commentary for the proposal, we pretty much looked at it in two ways. How can we better align incentives for all users and stakeholders with Anchor Protocol long term, and you can almost split it up into two buckets. The first is economic incentives, in the form of if you lock it up for longer you get greater access to protocol earnings going forward. And second, the governance incentive, which is over time, as Nate has mentioned, as Anchor grows in TVL, as Anchor expands to other ecosystems and adopt other collateral types it will become more and more important and critical to both the Tera ecosystem as well as just DeFi broadly. If Anchor had any issues, there would be a massive cascading effect. So naturally, the governance utility is almost spring loaded to really become more and more instrumental over time. So how can we really highlight that sort of governance utility, and we think gauges are a very good first step towards making that gradual transition, mostly because there’s going to be a lot of demand across liquid staking protocols. And one example is, if you look on, say, Solana today, there’s four main staking derivatives, Lido, several others. And the types of business models that staking derivatives have is just very commoditized. So they’re viciously competing for network effects to all kick in. And they all want more utility for their specific staking derivative. And Anchor is quite possibly the single most compelling use case for those derivatives in DeFi. So that’s maybe one way to look at it is bucketed into two types of incentives, and how best align them with the protocol long term.
Got it. So… Oh, go ahead, Nate.
Yeah, I mean, eloquently said. That’s exactly right, those two buckets, right. And I think the gauges, is probably where we can touch upon next, just because I think we’re talking about gauges and people might be like, “What the hell is a gauge,” right. [chuckle] And I think, Jose, maybe you could talk about this as well, because this comes from an LP model, right. It’s how you allocate admissions towards a certain pool, right, or a certain collateral type. You want to take that on, Jose?
José Maria Macedo 26:55
Yeah, for sure. So a gauge… Before we should have prepared a bit better. But yeah, a gauge is basically associated in the Curve model. It’s associated to each liquidity pool, and it’s how you allocate rewards to that liquidity pool. So for example, the three pool, or the different… Or the UST pool, all the different pools have gauges, users can stake their LP tokens to that gauge, and then that allows them to qualify for rewards. And then they can apply boosties by sort of attaching their veCRV to that gauge as well. So it’s kind of a complicated system. But the simple idea is that any pool that has a gauge is eligible to receive rewards and is eligible to be voted on to receive rewards. So in the case of Astroport, every single pool will have a gauge and users will be able to vote for any pool to receive rewards. In the case of something like Anchor, it would be the different collateral types, I guess, would be the gauges and users would be able to vote for which collateral type should receive the most rewards.
Yeah, exactly. Yeah. 100%. And so let’s think about the importance of this too, right. The gauges that typically are going to get the most votes are typically the collateral types or the pools that are making the protocol the most money, right. And so this is very important to think about. And this is a very strong point of the ve model, is you want to incentivize, A, the collateral types or the pools that are making the protocol the most money, right, because this is part of governance is to maximize… They’re the shareholders, they’re the stakers, they’re getting the final profits of the protocol, we want to maximize the revenue of the entire protocol. And so this is a very efficient way of letting the market dictate, A, what is going to be that most efficient, most revenue generating gauge out there.
Which I think is so beautiful and interesting about this concept is that, and I think Atari said it in a very nice way, it’s breaking down the topic of governance into the governance incentives themselves, right, and into an economic incentive with the gauges, right. Because the gauges themselves, you’re interested, right, probably because if you bring collateral, you want, of course, to get the incentives aligned with the collateral that you’re bringing there, right. So it’s basically breaking it a little bit more down. But, Jose, what I would like to ask you here, because I think that has been always, I don’t know, a meme in the community, right, is governance even valued in some kind of way, right. Because the Anchor token also had the governance right, but now it’s changing a bit more into this economic way. How do you in general see the importance of governance, right, and how this is now enhanced with this ve model, right, I think this is taking a step forward. How do you see that?
José Maria Macedo 29:48
Yeah, I think that’s one of the advantages of the ve model is it creates real value around governance, because it allows you to determine how the protocol issuance is distributed, which is basically which sort of supply siders should receive most of the issuance, and who should be diluted and who shouldn’t, which is obviously very valuable. And in the case of something like Anchor, which is obviously a super valuable protocol, you’re deciding on millions or hundreds of millions of dollars worth of emissions, right. And so there’s actually a cost that can be calculated per vote. And that’s kind of the cost that people are paying to bribe. So it allows you to create a lot more value around the governance token. And that’s not to mention sort of the boosties and stuff. So I think that is one of the advantages of the ve model.
Bribing is another topic which we I think maybe can talk about in a second. So let me maybe try to how I understand also this whole proposal and then maybe Nate or the guys of Retrograde can say this is right or wrong. So right now, me as a user, I’m a degen, everybody knows that, I bring my bAsset, I can bond it with Anchor, right, I can borrow UST against it. And because I’m borrowing right now, I’m also paid out in Anchor tokens, and there is the interest on the UST. What will happen now, once this proposal, if it goes through and it would go live, is that if I stake my ANC, I can now decide to also basically vest them or bond them with the Anchor Protocol, I get then ve Anchor and then I can vote on those rewards right now that are paid on a pro rata manner, right, to bETH and bLUNA, are just adjusted, right. So that for example, in the future, we have sAVAX, maybe more goes to sAVAX because the people have an interest that more is paid out. Is that high level how this will work, or would you guys like to add something?
Yeah. Oh, Nate, go ahead.
Straight forward. [chuckle]
Yeah I was gonna spin it over to you. No worries. I’ll chime in if Retrograde wants to chime in too, no doubt. Yeah, exactly. And so these gauges can essentially just dictate what percent of emission rewards can go to that collateral type. On a very high level, you could just think of it as a ratio, right, you’ve got total amount of votes, and then you’ve got the sum of each vote to each collateral type, then you could look at that as a ratio that then multiplies out what percent of rewards go to each gauge. It’s a very simple way of looking at it that could easily be a future model of this.
Yeah, yeah. And I’ll caveat two things. The first is, it doesn’t necessarily need to change Anchor emissions going forward. It’s pretty much just readjusting the pie and how it’s distributed. The second is on the governance component. Historically, the main stakeholders tended to really be retail. With the gauge model, you’re almost developing camps for each collateral type, and starts getting protocols and DAOs to become far more tied and having much more skin in the game for Anchor. That’s sort of where we see Retrograde really fitting in is, one, really helping to bridge and strengthen that sort of relationship between other DAOs and how much they care about the future of Anchor going forward, making that economic tie with the DAOs much more clear. And then the second piece is how each stakeholder and each Anchor token holder thinks through actually expanding their power and governance. Previously, if you look at traditional equities, and a Tesla stock, for example, all voting power and economic incentive is all just tied together. One of the best innovations of the token model is now we’re able to actually split the governance from the economic and sort of equity upside, which creates almost a brand new universe of opportunities. And that’s kind of where bribing would really come in and help make the market a lot more efficient.
You just mentioned it, bribing, right. So let me put it like this. So in the end, you are enabling your own protocol. Is that fair to say? Of course, take it in a positive way, right. So maybe you can quickly touch upon what happens on Ethereum right now. And I think we’re seeing this more and more also on Fantom, the topic of bribing and how important DAOs or certain protocols that enable this are now becoming to also drive all this liquidity or decision.
Yeah, the short way of how we view bribing and how it’s played out on other ecosystems is bribing at its core expands how protocols and stakeholders can get involved with Anchor so that you don’t actually need to hold, buy, and keep the Anchor token and take on that whatever price speculation and notional risk there. Instead, you can pretty much just bribe users and indirectly influence Anchor and in a multitude of different ways. So if you think of the universe of Anchor stakeholders as ANC token holders, bribing multiplies that by magnitude, because now people who don’t hold the Anchor token, can start getting involved and start having skin in the game, and start being invested in the future of Anchor going forward.
Got it. And then just to be sure on my side, so what will be your role in there? So you will enable the bribing itself so we know platforms on Ethereum? Or you’re acting yourself in that environment?
Yeah, we will release plenty more detail on the exact mechanisms pretty much shortly after this AMA. So obviously, stay tuned for that alpha leak. In terms of bribing, yeah, that is going to be a core part of the Retrograde product roadmap going forward, is building the full bribes layer, and bribes marketplace for Anchor and Astroport.
Got it? Got it. So maybe… Oh, go ahead.
José Maria Macedo 36:32
Yeah. What was your question?
Yeah, in terms of how you see right now, the whole Terra ecosystem evolving, right, Astroport will have vxASTRO on a long term. So now we have this proposal for veANC. We see right now how Apollo DAO is already buying up a lot of ASTRO, right, to be ready to maybe become a mini Convex on Terra. So I don’t know if you can also share your thoughts about how this will change probably the whole ecosystem.
José Maria Macedo 36:57
Yeah, no, for sure. So I have a kind of big thread and we have a report that we’re working on on this about ve models and bribing generally. But bribing is a really bad name. It’s kind of classic crypto, we just… We’re quite, I guess, brutally honest about things. In the real world, it’s lobbying, which sounds a lot nicer, like buying votes. But I think the problem with a lot of people see what bribing is it breaks that long term incentive, which is the whole point of the ve model, right. If people are just taking bribes for their votes, then doesn’t it… And you have the people paying for the votes who don’t actually have to own any tokens, doesn’t it break the whole ve model? And I think the answer to that is no, because the people who are taking the bribes have to own the token, right. So they can make short term decisions and try and just maximize their short term profit. But if they do that they have to live with the long term consequences of those decisions. There is a bit of a kind of negative externality, right, because if you are sort of a long term oriented participant, and you don’t take a bribe, you’re making less money than the people who do take a bribe, but you’re sharing the downside, right, so that’s a concern with the bribing system.
José Maria Macedo 38:16
But I think in general, the cool thing about the ve model is that it does punish short term thinking. So even if you’re taking bribes, if you’re voting in ways that aren’t best for the protocol, you kind of get punished in the long term. And then I think the second argument people have that they don’t like the bribe system is just the liquid staking derivative, right, which basically, it sort of breaks the lock, right. Because you can… Like for instance, once Retrograde launches, assuming it’s built similar to Convex, I don’t have any additional info here, you’ll be able to lock your ANC or your ASTRO and then you’ll get retro ANC or retro ASTRO right. And in the background Retrograde will max lock your ANC or max lock your ASTRO and use that voting power to boost some pools and then also potentially sell it for bribes, or do whatever with it, or have pass through exposure to retro holders being able to vote with it. And that means is the people who have liquid staking derivatives now suddenly they’re not locked, right, they can sell whenever they want. But the key is that those people can’t vote, right, the people who can vote is actually Retrograde the DAO, or Convex the DAO, and so there’s still someone who’s carrying that price risk, right. And that entity which is locked is the one that’s incentivized to act in the long term benefit of the protocol. So I guess my overall view on bribing is that it’s not really a bug. It’s more of a feature if it’s built right. Because it creates a market for governance power, right, and markets tend to make things more efficient, they tend to price them more efficiently. Yeah, and especially on the issuance part, I think… Yeah, I don’t think it’s necessarily a bad thing even though the name sounds really scary.
I love the point that you said in the end, the markets are making stuff more efficient and this is a market for governance power. Amazing. Haven’t thought about this. I’ll use that one if it’s okay for you from now on, Jose. [chuckle] Explain how bribing work. That’s a good one. Anything else, gentlemen, that we should talk about? Like other cases from other chains that are similar, that you maybe also use as a learning case here, before we go into the actual AMA and bring some people up here? I don’t know, Nate, or the guys from Retrograde, if you have another topic?
Yeah, I think we could briefly touch base on some of the different models. There was some talk about Platypus model versus a Curve model, the idea of accrual starts at the beginning and it grows over time, as opposed to just locking up for a long duration of time. And I know the guys over at Retrograde have some thoughts on that. So I’ll probably just spin that over to them and let them explain why they think the model that they’re laying out is better, which I tend to agree with.
Yeah, yeah, we actually posted a bit of a deeper analysis and a deep dive on the Platypus ve model. There are a couple of different pros and cons and we’ll pretty much pass this off to the community in terms of which they think is best fit for Anchor. So we’ll take more of a neutral stance for now. And then as we continue to uncover and as the community dives deeper, we can start to really decide on something that makes the most sense. I’d say the main sort of highlights, the TL;DR of the Platypus model is instead of locking up the PTP token, their governance token, for the max time period, you actually can just stake it and you’ll start to accrue vePTP points, almost, over time. So what that really means is it rewards early adopters and long term stakers and offers much more governance protection for retail investors, protocols, and DAOs, in the sense that I can’t just borrow a huge chunk of ANC tokens, lock it up for a short period of time, make one vote, and then move on. You actually need to truly lock it in and stake it for a long period of time, because it actually builds, versus having all of that from day one and having it depreciate the Curve model. So I’d say it’s far more of a populist approach. And the biggest issues with the Platypus model tend to be that it does disincentivize later entrants because of the accumulation period. So folks who lock up their token early on end up getting the lion’s share of governance. And then wallets actually lose all governance power if they unstake. So imagine if you had 10 PTP tokens. If you started staking it you start accruing vePTP over a period of time, but if you unstake it, you lose it all.
Yeah. I think that’s a really good way of explaining it. And so my main concern on this model, and I’m not saying what’s better either, taking a neutral stance here as well, is you could stagnate… There’s the possible potential for stagnation, right, if you’ve got a lot of early adopters that hold really tight to groupthink view of the way things were a year ago, and this can happen, things change so fast, and you’ve got a bunch of new users that recognize a new market need, a new market demand that the DAO has to change to, there could be disproportionate incentives for what actually needs to happen. And so this could disincentivize, the change that’s needed to happen from happening. So it’s one thing I see there. But there’s also on the flip side, we tend to forget basic business principles in crypto sometimes. The idea of locking tokens for four years hasn’t been talked about a lot. But there is a thing in finance called net present value, right, you have to take a discount rate. So if you’re locking something up for four years, let’s take the Anchor rate, which is 20%, you have to assign that to a net present value over time. That essentially equates to I think around a 50% net present value discount for your tokens. So you essentially cut your value of tokens in half when you lock them up for four years. That’s an eternity in the crypto space. So now you might be incentivized to do something that’s short term gain, to pay you back for that discount that you got in the token. So there’s essentially a moral hazard that can be created as well from this long term staking lock up. Especially if you continually lock them, you eventually get your net present value to zero. So now you just have coupon payment over time, which is the staking return. So I think we have to be careful here too and actually really explore, and look at this, question it, maybe not completely copy the model where we just say, “Oh, it worked for four years over there.” Let’s think about economic consequences, let’s think about populous, let’s think about all the pros and cons and try to pick the best model. So definitely want more community involvement on this, people challenging it, thinking more like this.
Got it. And I think that’s a good point to just send everybody also to the Anchor forum, right, Nate? We usually have this meme between us. [chuckle]
Absolutely. [chuckle] I mean, that should be my… I should just have the link on my Twitter background, right. [chuckle]
Yeah, come on. [chuckle] So I would say we just open up right now the AMA. So if somebody has a question here, either to the Anchor team, to Retrograde, or Jose about this topic of ve tokenomics, just request to speak. And while we’re just waiting for a second here, I don’t know if one of you guys would like to reflect now that we talked about this locking and also about that it goes away, so I see also, Prism has now a similar model, which they call AMPS, right, you can launch your… Is that the right word, I hope so… Your xPRISM and the moment you just unstake, any kind of xPRISM you’re losing those AMPS. So I don’t know if you guys would like to quickly reflect on this while we’re waiting here for more speakers with questions for you guys. Take it away or not. [chuckle] We’re just waiting here for people to come in anyway.
Yeah, I think just turn it over to questions would be great. Doesn’t look like we’ve had anyone up on stage yet.
Yeah. Go ahead, Jose.
José Maria Macedo 46:36
I think Prism’s model is more similar to Platypus, where as you stake for longer, it acts as kind of an amplification factor on your yield, versus the ve model, where you kind of like pre-commit upfront. And I’m kind of on board with Retrograde here in terms of preferring the ve model, just because if I come in, and I’m a long term participant, I can just prove it right, I can just lock for four years and I can prove it, rather than actually having to wait for X amount of time until I’m considered a long term participant. It just feels a bit more inefficient. And it does create that grandfathering in of people that have been in for a while. Although Prism has done a really good job with their formula in terms of making it not too heavy for newcomers. So yeah, there’s different ways to parameterize things.
Gotcha. I think in the end is probably everybody tries to find the best way and probably we’ll need adjustments and changes in all those different protocols. So we have now different people up here. So let’s say we start now with dghjud, I hope I didn’t butcher your name. And then we go with Matt Hepler as next.
Hi, thanks for taking my question. My name actually, I just kind of just typed on the keyboard. My question is around tokenomics. My name…
[laughs] Great one.
Sorry. So my question is around tokenomics. But it’s not specifically ve tokenomics. It’s would the Anchor Protocol team think about, let’s say, lending out the Anchor token itself, let’s say on Mars to earn extra yield, because it’s kind of a riskless way of getting more yield without having to worry about anything else, assuming people want to borrow it.
I mean, define what tokens we would loan out, right, ’cause…
The Anchor token itself.
Right. But we don’t have any protocol owned liquidity in that sense.
Well the reserve, ’cause buying some back when there’s some… They could.
You mean taking the yield reserve, buying back…
Well, ’cause the reserve does do that anyway, right?
Yeah, so redirecting some…
Redirecting yield, yeah.
Yeah. So the way the yield… So there’s a 10% redirection, right. So 10% of profit is bought the Anchor tokens and given to stakers so if you were to take that and redirect it to Mars, then you’d be taking that away from the stakers.
Well, so even if there’s even a one time increase buy you don’t need to do that once. So then…
So yeah, so the idea would be protocol owned liquidity, and…
Lend it out for more yield, which is good for stakers.
Lend it out for more yield. I mean, that’s certainly a possibility. I mean, I’m not a huge fan of protocol owned liquidity, because it’s hard to actually metric and crypto has such a high beta. So you’re taking straight on… If you look at the markets today, you’re talking 5-10 times drop per equities. And so you’re internalizing that risk factor into the protocol. And we’ve seen it blow up with TIME, right, that was for different reasons, but at the same time, they had a ton of beta, and it blew up on a market downturn. So I think you got to figure that out as well.
There’s also… The last thing was that if people are actually leveraging the Anchor token itself and they get liquidated, there’s also an idea that Anchor itself may be partnering with Kujira, or I know White Whale also is looking to getting liquidations, if they can get the liquidations, they can also get more of the Anchor token itself. If they’re getting liquidated, it could just… It doesn’t necessarily need to be sold right away. It could just be held.
What would be held?
No. So the liquidations a piece of it… I mean, obviously, they need to be sold. But since there is a gap between… You get buying whatever the token is, at 70… Or Anchor at 7% discount or wherever it is, because people got liquidated. So you buy the 7% discount, you sell enough to cover the cost of buying it and you keep that 7% profit in the Anchor token which can benefit Anchor token holders.
The protocol doesn’t actually keep the 7% discount from that.
No, I understand. That’s what I’m saying. But if you’re the ones liquidating…
So you’re saying that… So having people bidding on liquidation queues, get that 7% discount on Anchor tokens?
For Anchor. Yeah.
I mean, that’s an interesting thing to think about, no doubt. Throw it out there on the forum. Let’s see what people think about it.
Alright, that was my…
Yeah. Thanks. Thanks for making me think.
A great one. And as you said, Nate, right there is the forum. So why not writing it down, and putting out this so the people can talk about it, which I think is a great thing. Cool. We have next one, Matt, up here.
Matt Hepler 51:39
Yeah, thanks for having me on. I’m a team member of Orca. And we’re investors in Anchor and the LUNA ecosystem. And we’re power users, and so we thought it’d be good just to provide a investor based perspective. We actually submitted a proposal yesterday that really focused on the deposit side, to try to align more utility, improve sustainability and create more value for the ANC token itself. Personally, my background is, I’ve been in governance on the TradFi side for the last 15 years, and I’ve served on public company boards. And our thoughts are on the governance side, we think that your vote shouldn’t be dependent on how long you own something, it should be dependent on how much you own of something. If I buy a share of Apple, I don’t get, 0.25 votes, and have to wait four years for that token to be recognized as a vote. And we think if you’re worried about protecting against proposals or lending to take some position that can be incorporated in some other form of governance, ultimately when investors take large positions and are proposing something, it’s to create value, they have economic exposure. If it’s something that’s going to be net negative for net present value, it’s not worth submitting, or it’s not worth trying to submit. So we have our proposal on the forum, we thought it was pretty simplistic, we thought it was good for the ANC price. We think this addresses a lot of the concentration of rewards that are given to the large ANC depositors. And we think it also provides a lot of benefit on the lending side, because the net borrow rate actually declines with a higher ANC price. So although we haven’t had a lot of time to socialize our proposal, we’re happy to take any feedback and want to just provide those those thoughts around governance.
No, I appreciate it. Maybe you could just… Since you’ve hopped up here, it would probably be great, just because you iterated on it, just give us a quick breakdown for the community of the proposal that you threw out there, just the main key points there.
Matt Hepler 54:29
Yeah, the key points were we’re trying to find a very simplistic way to improve utility while keeping rewards high on the deposit side. So really the key part of the proposal is we started with a number at $100,000 where if you’re a depositor, and you have $100,000 of deposits in UST, you would need to own 10% of that in Anchor tokens to receive the full 20% rewards. And you could choose not to, but that 20% would drop to 10%. And the whole concept is to have some skin in the game to earn those high rewards. You can architect this in many ways, you could make it just a straight percentage across the board. We wanted to ensure adoption continues to improve, that’s why we set kind of the $100,000 threshold, because we’re really focusing on the larger depositors that didn’t really have a lot of skin in the game that are still earning a lot of rewards and creating this need for consistent capital infusions. So that’s really like the premise of the proposal. And I think some of these concepts can be integrated with a lot of the work that you guys have done. But I think this really moves the needle and creates a lot of demand and aligns depositors with ANC holders.
José Maria Macedo 56:16
I think there’s some implementation problems. I’m sorry, Nate, do you want to say something?
100%, you’re probably gonna say the same thing I was. So go ahead.
José Maria Macedo 56:23
Yeah, there’s some implementation problems with it. First of all, it’d be really expensive to do, because the contract would have to constantly know what the Anchor price is, in order to know what rate to pay out to users. It will have to query that pretty much… I mean, whatever time period you want to the recalculation at, which is pretty tough to do, especially on a cross-chain basis. So if people were holding aUST on Ethereum, or on Solana, or whatever, it would make it really difficult. And the second thing is it breaks the composability of… Well, it breaks the fungibility of aUST, right, because you wouldn’t have all aUST earning the same yield. So I guess the extra yield would… The base yield, whatever that was, like 15%, would I guess go to aUST and the rest would have to be sent to your address where you’re holding your Anchor or something like that, which just seems a little bit messy. So I think there are some implementation problems.
Yeah. That would be really hard. You’d have to restructure the whole aUST model, if you were still going into it with fungibility. And we still haven’t… We’ve had a lot of smart devs in the room and we still haven’t really figured out how you would actually do that. The easiest way to implement it is with a separate contract, right. And so you’ve got a base rate of 10%, and then you’ve got a contract that tracks time for a different aUST deposit. So yes, it breaks fungibility on part of it. The bots will circumvent this. So I’m not saying this idea doesn’t make sense. The reason it just hasn’t been implemented is because it’s really messy. And there hasn’t been a great way to actually get this out on the dev side.
Yeah, and I’ll chime in here. Yeah, I think two of the things you mentioned, were first, having emphasis on the amount of tokens held, I think, does put us back a couple of steps. Because the whole purpose of this is to help get governance power and influence away from your typical largest holders of the governance token. And then referencing like an Apple stock for example, and how that governance model has worked over the last couple of decades is definitely not fully utilizing the opportunity we get from tokens and stripping them apart.
Matt Hepler 58:42
Yeah, I think the bottom line is we… And we obviously socialize this with other larger investors. And I think there’s a recognition that the reward system is not sustainable at 20% with continued capital injections. And I think we do have a view that this can be implemented in some shape or form that would be much more impactful to the Anchor price. And I really believe representation should be based on ownership versus having to lock something for four years to get representative ownership.
Yeah, I think the four years, I think we could probably have common ground there. I agree with you on the four years, we need to look at that from net present value, just as you said, just as I said. But the ve model doesn’t rule out having a certain percent of the tokens to do the model you laid out. It just has obviously the implications… And I’m not against it either. You could create an aUST, and if you create a veaUST that takes 10% or 5%, if you have X% of veANC locked up. There’s ways to do it. I think we can explore it. This ve token model does not rule out that happenning.
Cool. And Matt, you said anyway, I’m right now also on it, on the proposal, I think it’s a great chance for everybody to go through it, right. You put a lot of work in there. I’m right now and it so it’s a good read. So it’s great that you put work in there. And I think hopefully everybody who is now interested, goes on the forum and discuss this thing. Great stuff. Thank you.
Yeah. Thanks, Matt. Really appreciate that.
Matt Hepler 1:00:39
Cool. Then also taking a look at the time we have three more speakers up here. Cephii. Hey, good to see you here. Would you like to go next?
Hey, my reception is terrible. So can you let me know if you can hear me okay?
We can hear you. The question is, can you hear us?
Yeah, danku. Yeah, hopefully we’re okay. I’m gonna make it really quick. So between bitN8 and Jose’s points, maybe a system where there’s the ability to lock 1, 2, 3, or 4 years maybe, sort of like how Astroport has different durations of lockups. Maybe that would be a balance point between having to hold four years versus some shorter period of time and maybe have an amplification of governance based on what you commit to upfront.
Anybody wants to pick that one up?
I can touch upon that quickly. Yeah, in the veANC proposal, we extended it upwards from one to four years. But the time period is very much up to discussion. And I think that the community can very much form fit it around exactly what works best for Anchor, and one where the full community signs off on. So it’s something that can be very flexible, and we’ll absolutely have more discussions around that.
But you see what I mean, though, the option to stake, for lack of a better word, a different time periods to get different levels of governance, as opposed to having to pick one time frame that’s “perfect”.
That’s all I’m saying. Yeah.
That’s exactly what we mean. We’re in full agreement, there will be a spectrum of different time periods and locks.
Yeah, 100%. I think it needs to be that way. And I think we actually need to look at the math as some other protocols probably haven’t. And let’s actually look at a net present value of what makes the most sense. I’d like to put that out there. [chuckle]
Nice one. Great. Thank you. Cephii. Let’s go next, Robbie, and then with Davis.
Robbie Božić 1:02:52
Hi, man. Actually, I’m in position on exchange on ANC token the next leverage and how many I have a decent amount but I wanna sell them on spot and close position. Now is on 298, how many tokens…
Okay, he disappeared accidentally. Let’s go ahead with David.
Hey guys, how are you doing? I just wanted to quickly ask, I know you guys probably already have obviously bSOL, and sAVAX in the works already, probably getting close to launch. I know there wants to be as well bDOT and bATOM. So just wondering what the timelines are looking like on those.
Yeah. So part of it has to do with Wormhole. Wormhole timelines, sadly they haven’t quite hit targets there. We were hoping that there would be Wormhole DOT sooner. Right now that’s up to external teams too, like Moonbeam Moonriver is working with Lido to create stDOT, and you got Alcala that’s working to create a liquid DOT as well, they’ll probably be others that pop up. So it’s really a matter of, A, when are those ready, when do those have liquidity under them, and, B, when does Wormhole launch DOT support. So I think the manner of order, like ETH is really easy that should be happening soon, AVAX really easy that should be happening soon. And then others on the list would be like Polygon, DOT, and continuing to move down the list of Wormhole compatibility, Fantom.
Yeah, I mean definitely you want to stay with the ones that have staking rewards up from 8% or more, obviously, it’d just be better for the sustainability of Anchor. So definitely bATOM is probably going to be a really big one for you guys. And yeah, AVAX as well.
Yep, exactly bATOM’s about to hit testnet soon. So that’ll be exciting.
Good news and Cephii will be super happy about that. He’s always talking and tweeting about bATOM so he can’t wait anymore. [chuckle] After he just put his… Are you surprised that he was asking that one? [laughter]
Yeah, it’s been a while. [chuckle]
Good one. So we hit the hour. Thank you, David, also for your last question. Sorry, there are more people, of course, requesting to ask to speak here. But of course, all our guests have also their tight agenda. So we would close it here. So Nate, maybe you would like to also close it from the Anchor side. And if the other, of course, guests would like to add something, Jose or Retrograde, go ahead and take it from here.
Yeah, this was awesome. This was one of the best ones we’ve done in a while. It was fun. It was exciting. On another note, Anchor is having a community sponsored audit with Code4rena right now. So check that out. That means if you are an auditor, and if you want to find some bugs, you can get rewarded to do that. So please go check that out. Outside of that, we’re gonna keep moving full steam on this, get out to the forum, add your thoughts, there’s a lot of things to talk about. And let’s get some new tokenomics measures passed within the next month or so.
Yeah, I’ll chime in. It’s been an honor to be part of this whole process and to really see the community rally around the proposal. We’ll be releasing a Discord channel for folks to really kind of dive in, better understand what Retrograde has in store and how we find the best fit, and work together with some of the best protocols in the ecosystem. So watch out for those announcements.
Nice, one. Jose, anything closing from your side?
José Maria Macedo 1:07:04
No, I really enjoyed the discussion. I also think there are some great points on the forum that we didn’t get to discuss about sort of the applicability of a ve model that’s normally used for exchanges, right, that’s been proven out with Curve to a lending platform where this would be a first. And there are some key differences, which I think are worth discussing. But maybe we can do that on another call. And I’ll definitely be chiming in on the forum as well.
Yeah, 100%. There’s a lot more to talk about, we could probably do another one of these in a week or two. So let’s look at doing that.
Very good. And you guys know that you’re also invited, maybe we take it to YouTube in the future as well. And show also some charts that which maybe sometimes help on top to visualize it a bit. It’s not a quick plug on my side. No, no, it’s not. [chuckle]
So I had also a great time. [chuckle] Thank you. We hit I think in the peak over 500 people listening to this show. This shows also how important Anchor of course is to everybody, how people are interested into this. I had an amazing time. Retrograde, great to have you here. Jose, always a pleasure to listen to you. And Anchor, thank you for letting me hosting this one. So I would say do we have a date already for the next one Nate? Maybe you can quickly share if we have something. If not, that would be…
Let’s try to throw something out there in two weeks. Let’s let the ideas pollinate and then maybe something around this time to two weeks we can do a follow up. We’ll try to dive even deeper on this one, make it a bit more technical.
Very good. Okay. Then I would say everybody stay safe out there, difficult times, but we had now a good hour together and then speak to you soon again. Bye bye.
Thanks for checking out another episode of The Ether. That was a Tokenomics Discussion with Delphi Digital and Retrograde Money. Recorded on Thursday, February 24th 2022. This episode of The Ether was brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Take advantage of their Terra Luna Intel Report on Telegram which brings you the hottest news and updates on all things Terra each and every day. Find it using the link in the show notes. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at orbitalcommand.io This episode of The Ether was also brought to you by Luart. Luart is the first gamified NFT platform built on the Terra network. Luart provides a seamless minting and trading experience all while earning you rewards just for being a user. Be sure to follow them on Twitter and join the community in the Discord server for the most up to date news and announcements regarding all the hot new NFT launches, platform upgrades. and new projects hitting the secondary marketplace. Are you ready to #PutYourHelmetOn and join the movement? Find out more luart.io. TerraSpaces appreciates the support from all our sponsors. For terraspaces.org, I’m Finn. Thanks for listening.